“We Look Like Entitled Brats”: One of Silicon Valley’s Top V.C.s Sounds Off

Few people in Silicon Valley have been as consistently apocalyptic as Benchmark’s Bill Gurley. “I do think you’ll see some dead unicorns this year,” the top venture capitalist, who has invested in multi-billion-dollar start-ups like Uber and Snapchat, quipped at SXSW last year, warning of the incendiary risk posed by high burn rates in an ecosystem in which venture capital is sloshing around. A few months later, he connected today’s delivery start-ups to the tech companies that flamed out during the first tech bubble. “It’s like, the last time all this Postmates and Shyp stuff happened [in] ’99, with Kosmo, it‘s the same s---,” he said. “The smartphone helps a little bit. You have more data. But we’ll see. The question for all of those things has to do with core economics that’ll be proven out over time.”

And he’s still ringing the alarm about the dangers of magical thinking. In a recent interview with Recode’s Kara Swisher, Gurley warns that too much risk-taking in tech could lead to major “consequences” for the tech sector—including, at worst, something resembling another market crash—if entrepreneurs don’t learn to bring their world-changing ideas in line with reality. “We had done something in the ecosystem to encourage this type of outlandish promotion, where you feel like you need to use words like ‘trillion,’" he said. “And I think it’s dangerous. When we act like we have the right to disrupt everything or eat every industry, but we’re not willing to play by the rules of profitability or GAAP accounting or being public, we look like entitled brats. And the really bad end state of that type of behavior is [that] we invite regulation from Washington that I’d prefer we not have.”

Gurley, whose firm led Uber’s Series A round of funding in 2011, also explained why the world’s most valuable private tech company won’t go public for a while. Competition in the ride-hailing space, he said, is steep. “We have a large number of competitors who are very deep-pocketed, who have decided that their primary form of competition is just price,” said Gurley, who sits on Uber’s board. “There are intense subsidy battles going on all over world. Those companies, when they approach investors, tell them, ‘Uber’s going to go public, and then they’re going to have to be profitable, and then we’re really going to sneak up on them with these discounts.’”

That note of caution for Uber is somewhat ironic, given that Gurley has previously argued that many private companies are overvalued. “If you’ve got a CEO saying they won’t go public, you should be using a 70% or 80% liquidity discount,” he said last year, warning investors to be wary of private tech companies that resist going public. Gurley may be urging Silicon Valley to think realistically about profit, but for Uber—a company in which he has a stake—he seems to suggest the company should take in private funding until its competitors are crushed. Whether that’s prescient or “outlandish” remains to be seen.